Workers compensation opt out could help Illinois employers control costs and better serve injured workers while simultaneously making way for much-needed system reforms, according to a new report.

The Illinois Policy Institute, a research and education organization, last month published a report calling for updates to the state's more than 100-year-old workers comp system.

In Illinois and other states, “the system that is in place isn't serving workers effectively,” Mark Adams, the report's author and director of regulatory reform at the institute in Chicago, said in a phone interview Tuesday. He added that it's difficult to reform the system because there are so many stakeholders.

According to the report, “The most effective way for government to protect workers is not by a restrictive one-size-fits-all system, but by creating broad rules of the game that give workers more freedom to contract with employers for a deal that is better suited to their own situation.”

That's one reason behind the push for opt out, though there hasn't been a lot of talk on the topic in Illinois to date, Mr. Adams said.

Based on Texas' 100-year-old nonsubscription system, Oklahoma's two-year-old Employee Injury Benefit Act allows employers to opt out of the state's workers comp system by providing alternative benefits to injured workers. Similar bills introduced last year in Tennessee and South Carolina are on hold.

Mr. Adams states in the report that “allowing bargains outside the system has reduced special interest opposition to reforming the workers compensation system in Texas, and that effort has enjoyed some success in convincing employers to opt in again.”

After a yearlong state budget impasse in Illinois, Gov. Bruce Rauner, who has previously donated to the Illinois Policy Institute, finally signed a stopgap budget and school funding bill into law, but potential updates to the state's workers comp system likely won't be addressed until after the election in November. Gov. Rauner has made workers comp reform a key element of his Illinois “turnaround agenda” since his election in 2014.

The potential for constitutional challenges to opt out laws could give pause to states considering such legislation, as the Oklahoma Workers' Compensation Commission in February ruled that provisions of the state's Employee Injury Benefit Act deprive injured workers of equal protection and access to the courts, and unfairly allow employers to define “injury.” The Oklahoma Supreme Court agreed to review the case, Jonnie Yvonne Vasquez v. Dillard's Inc., in which an injured worker was denied benefits because the retailer's alternative benefits plan doesn't cover pre-existing injuries.

Meanwhile, the National Conference of Insurance Legislators last month decided there's not enough support to propose a model opt-out law at this time, but states can still move forward with opt-out legislation.

And according to Mr. Adams, they most likely will.

“Right now we have a system that really looks like it deals with the 19th Century,” he said. “It doesn't deal with telecommuters, it doesn't deal with people who might have to balance caring for a child, caring for an elderly relative, with work responsibilities. Where you don't clock in at 9, you don't clock out at 5. You might be answering emails at 10 at night. The workers compensation system doesn't deal with that.”